China’s Imperial Predicament

In their interactions with the South, Chinese leaders have always affirmed that their country is a developing nation too, and that China will never replicate the unjust, exploitative behaviour of the former imperial powers. “China is the world’s largest developing country, and Africa is home to the largest number of developing countries,” declared Chinese president Hu Jintao on 19 July at the Forum on China-Africa Cooperation in Beijing. “The Chinese and African peoples have always treated each other as equals and with sincerity and friendship, extended mutual support and pursued common development” (1).

It is easy to dismiss such statements as standard diplomatic patter. But the Chinese are fully aware of the many humiliations they suffered at the hands of the European imperial powers and Japan. Even so, their current leaders are caught in a bind: to sustain high rates of economic growth at home — their number one priority — they must procure ever growing quantities of oil and other raw materials from foreign suppliers. And to ensure the uninterrupted delivery of these resources, they are becoming enmeshed in patron-client relationships with the governments of supplying countries (many of them corrupt and undemocratic) of the sort that have long been maintained by the major western powers.

Certain poor exporting countries with large deposits of oil, copper and other valuable commodities fall victim to the “resource curse”, under which they suffer from the emergence of rent-seeking, authoritarian regimes backed by well-paid security forces. And often the major importing countries are afflicted by a “reverse resource curse” under which they become complicit in the survival of those very regimes. The greater the importing countries’ dependence on materials obtained from those regimes, the more vigorous their steps to ensure their survival.

This pattern is evident in the United States’ ties with the Gulf oil kingdoms. President Franklin Delano Roosevelt, like current Chinese leaders, had an instinctive abhorrence of empires and feudalism. But during the second world war, his advisers warned him that US oilfields were being depleted at an alarming rate and a reliable foreign source of supply was needed — preferably Saudi Arabia, the only major Middle Eastern producer not then under British control. Roosevelt met with King Abdul Aziz ibn Saud in February 1945 and concluded an informal arrangement under which the US would provide military protection to the kingdom in return for exclusive access to Saudi oil. Though its terms have since been modified (the Saudi royal family now owns the oilfields, not US oil companies), the arrangement is still a major driver of US policy in the region.

Given the choice, US leaders would prefer to obtain their oil imports from friendly, stable, reliable nations like Canada, Mexico, the UK and other members of the Organisation for Economic Cooperation and Development (OECD). But the realities of oil geology make it impossible. Most of the world’s remaining oil lies in Africa, the Middle East, the former Soviet Union, and now, with its offshore “pre-salt” discoveries, Brazil (2). So the US has had to rely on oil from countries that are unfriendly, unstable or unreliable — becoming involved in these countries’ politics by forming alliances with leaders and giving them myriad forms of military assistance.

How to escape the US experience

At the start of the 20th century, the European imperial powers fought for control over territories thought to be rich in oil, coal, rubber and assorted minerals, and, to facilitate the extraction of valuable resources, created or chartered powerful corporate entities, state-owned or private. After independence, these continued their operations, usually forming strong ties with local elites and perpetuating the privileged position they had once enjoyed under the colonial administration. This was the case with British Petroleum (BP, formerly the state-owned Anglo-Iranian Oil Company), Total SA (French, created through a merger of several state-owned oil firms) and Eni (formerly the state-owned Ente Nazionale Idrocarburi).

Chinese leaders seek to escape this trajectory. At the Forum on China-Africa Cooperation in Beijing, President Hu announced a loan of $20bn to African countries over the next three years for agriculture, infrastructure and small businesses. Senior Chinese officials also eschew any intention of intervening in the internal affairs of supplier states. Even so, Beijing is finding it hard to escape the political entanglements experienced by the US and other western powers.

China was able to rely on its own oil until 1993, but as demand rose, it began to import ever-increasing amounts: imports jumped from 1.5m to 5m barrels per day (mbd) between 2000 and 2010, an increase of 330%.

If current projections prove accurate, they will reach 11.6 mbd by 2035. And with the rapid expansion of the country’s car fleet, some analysts believe that China’s oil imports will rise higher still, with net oil consumption reaching 19 mbd by 2040 — about the same amount as the US is expected to consume (3). But while the US will be able to satisfy about two-thirds of its own oil requirements, with help from neighbouring Canada, China’s domestic supplies will cover only about a quarter of its requirements. It will have to import the rest from Africa, the Middle East, South America and the former Soviet Union.

If China is to meet an expected three-fold increase in electricity generation over the next 25 years, it must increase its consumption of coal, natural gas and uranium. Natural gas imports are projected to rise from zero in 2005 to 87bn cubic metres in 2020 and 118bn in 2030. Most of these imports are likely to come in the form of liquefied natural gas from the Middle East and Southeast Asia or via pipeline from Russia and Turkmenistan. China will continue to supply most of its coal from domestic sources, but bottlenecks in production and transportation have made it more efficient and economical for coastal provinces in the booming southeast to import coal from Australia and Indonesia. China’s coal imports, zero prior to 2009, jumped to a staggering 183m tons in 2011 (4). It has also experienced a huge increase in demand for imported minerals such as iron and copper, as well as specialty minerals such as cobalt, chromium and nickel needed for advanced electronics and high-strength alloys.

As China’s reliance on imported materials has grown, a major leadership concern has become the reliability of supply. Deputy foreign minister Le Yucheng said, in an unusually candid remark: “The most important task for China is to make sure that [its] 1.3 billion people can lead a good life, and you can imagine how challenging this is and what enormous pressure this puts on the government. I believe nothing is more important than this. Everything else must serve this central task” (5). It follows that uninterrupted delivery of ever-growing quantities of imported resources is a critical foreign policy objective.

Chinese leaders are fully aware of the risks of supply disruptions as a result of civil strife, regime turnover and regional conflicts. To minimise the risks, China — treading a path carved out by the western powers — has sought to diversify its sources of supply, develop close political ties with its major foreign suppliers and acquire equity stakes in foreign energy and mineral deposits. Chinese leaders, seeing these moves as essential to sustaining economic growth, believe they must be carried out under central government oversight and with the strong support of all government components — including state-owned banks and corporations, the diplomatic corps and the military (6).

In the case of oil, the government has pressed the country’s three state-owned firms — China National Petroleum Corporation (CNPC), China National Petrochemical Corporation (Sinopec), and China National Offshore Oil Corporation (CNOOC) — to acquire equity stakes in foreign oil fields and participate in joint ventures with the national oil companies of foreign producing countries, such as Saudi Aramco, Petróleos de Venezuela SA (PdVSA) and Sociedade Nacional de Combustíveis de Angola (Sonangol). It is a similar story in the mining industry, where state-owned companies like China Minmetals Corporation and the China Nonferrous Metals Mining Group have pursued their own “go out” strategy, acquiring mines in many areas and participating in joint ventures with other major firms.

All this has involved extensive diplomacy, and often a pledge of inducements, including low-interest loans, lavish dinners in Beijing, prestige projects like sports stadiums and military assistance. To help Sinopec acquire a 50% share of a promising offshore block in Angola, for example, the Chinese awarded the Angolan government a low-interest, no-strings-attached $2bn development loan; to smooth CNPC’s pending deals with PdVSA, they offered the Venezuelans a $20bn loan (7). Other countries, including Sudan and Zimbabwe, have been provided with arms and military services in return for access to oil and mineral resources.

Such arrangements lead China to ever-deeper involvement in the political and military affairs of the countries involved. In Sudan, Beijing has been accused of aiding the brutal regime of President Omar al-Bashir with weaponry and diplomatic cover at the UN, in order to protect CNPC’s ownership stake in Sudan’s largest oil field. “China is Sudan’s most important investor,” the International Crisis Group reported in June 2008. “The combination of Beijing’s desire to protect [CNPC’s] investments, enhance energy security through equity oil, and its traditional policy of non-interference, have led it to insulate the Sudanese regime from international pressure.” The Chinese have recently reduced (though not stopped) their support for Bashir, especially after the establishment last year of the independent state of South Sudan (where much of the oil is located).

The Chinese have also been criticised for their support of other corrupt and dictatorial regimes on which they rely for vital materials, including Iran and Zimbabwe. As in Sudan, China’s support of the Iranian regime is said to include both military aid and diplomatic cover at the UN, where Tehran has come under scrutiny for its alleged pursuit of nuclear weapons. In Zimbabwe, China is thought to have aided Robert Mugabe’s repressive regime by supplying his security forces with arms and military training — receiving farmland, tobacco and valuable minerals in return.

Even when dealing with less internationally isolated countries, Beijing’s preference for arranging deals with friendly governments and state-owned entities inevitably results in the enrichment of local elites, with few benefits filtering down to the impoverished masses. In Angola, China has developed close ties with Sonangol — a state-owned firm controlled by figures close to President José Eduardo dos Santos. Sonangol is the biggest and wealthiest company in Angola, and its senior officials are said to enjoy great wealth and privilege, while most of Angola’s population subsist on less than $2 per day. Of course, Chinese companies are not alone in working with Sonangol: there are also major firms from the US and Europe, including giants such as Chevron, ExxonMobil and BP. But by continuing to do business with the Angolan regime (and others of a similar nature), China — like the western powers — becomes complicit in a system that perpetuates the privileges of a few at the expense of the many.

Chinese officials hope to counter this trend by providing development aid to small farmers and others in the lower and middle ranks. But the country’s demand for raw materials is so great, and fast growing, that it has to give priority to foreign enterprises involved in the delivery of vital resources. In areas where it is deeply involved in the extraction of oil or minerals, such as sub-Saharan Africa, China has invested heavily in the construction of railroads, ports, pipelines and other infrastructure. These ventures may benefit other endeavours but, by and large, are geared to the needs of Chinese-linked oil and mining firms.

“At first sight, China’s appetite for natural resources has come as a blessing for Africa,” observes a report prepared for the Development Committee of the European Parliament (8). China has in fact contributed to the continent’s net economic growth. But closer inspection reveals a more complicated picture. In 2005, only 14 African countries — all producers of oil or minerals — saw a positive balance of trade with China, largely based on the export of raw materials. Thirty countries experienced a negative balance as cheap Chinese textiles and other consumer goods flooded their markets, often displacing local producers.

In China-Africa exchanges, this division between “net winners” and “net losers” has been steadily widening, producing considerable resentment in some African countries. “For the majority of African countries,” the report concluded, China’s development rhetoric “raises high expectations, but does not create the conditions for sustainable economic growth.”

If China continues to prioritise the acquisition of resources above all else, it will find itself behaving more and more like the former imperial powers, aligning itself with the rent-seeking governments of resource-rich countries and doing little to advance overall development. As South African president Jacob Zuma remarked at the 2012 Forum on China-Africa Cooperation, “Africa’s commitment to China’s development” has largely consisted of the “supply of raw materials” — a pattern that “is unsustainable in the long term” (9). Given how hard Beijing has worked to develop strong ties with Zuma and the South Africans, this is a powerful message.

But any significant shift in China’s trade with Africa (and the developing world in general) will require a corresponding shift in the structure of China’s economy — from a reliance on resource-intensive industries to light industry and services, accompanied by shift in energy from reliance on fossil fuels to renewable forms of energy. Chinese leaders certainly appear to be aware of this imperative, as the latest Five-Year Plan (2011-2015) places a high premium on the development of alternative transportation systems, renewable energy, new materials, biotechnology and other endeavours that would permit a structural shift of just this sort. Without that, China’s leaders will find themselves ever more deeply enmeshed in the often tumultuous and unsavoury politics of the developing world.